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Friday, July 25, 2014  

Tata Motors Q2 net rises 10.5%
MUMBAI Tata Motors, the country’s largest carmaker by revenue, posted a 10.5 per cent gain in quarterly net profit, but lagged estimates as pricing pressure impacted its Indian business margins and slowing economic growth impacted demand for commercial vehicles.

The car maker said net profit rose to Rs20.75 billion in July-September from Rs18.77 billion a year ago, while revenue increased 20 per cent to Rs434.03 billion on rising demand at its key Jaguar Land Rover subsidiary. The operating margin for its India business fell to 5.9 per cent for the quarter down from 7.2 per cent in the year ago period.

Tata Motors’ Chief Financial Officer C Ramakrishnan said that the company expected to improve its India profit margins, as it continues to focus on cutting operational costs, but the demand outlook was clouded by the slowing economic growth.

“We continue to see sluggish economic activity,” he said. “We continue to see demand pressure in the market.”

Tata Motors, which depends on JLR for 90 per cent of the group’s profit, said the iconic British brand’s operating margin stood at 14.8 per cent in July-September, down from 14.9 per cent a year earlier.

Revenue at the luxury British brand rose 12.8 per cent to 3.29 billion pounds in the period, less than the 34.4 per cent gain seen in the previous quarter.

Tata has grown dependent on JLR, which it bought for $2.3 billion in 2008, as domestic sales of its own models struggle.

JLR’s recent success has also driven Tata’s stock price 50 per cent higher over the past 12 months.

Profit from the company’s Tata-branded Indian business, which had fallen for four straight quarters, rose nearly eight-fold to Rs8.67 billion. That was mainly because the company took an exceptional charge in the year-earlier quarter.

Domestic sales of Tata’s own brand of cars and trucks have sagged due to India’s cooling economy.

Tata also faces strong competition in India from global carmakers such as Ford Motor Co and Volkswagen and truck manufacturers such as Daimler as they scale up operations in the company’s backyard.

Shares in Tata Motors ended 0.9 per cent higher ahead of earnings announcement at 269.35 rupees, while the main Mumbai market index closed 0.5 per cent higher.

Reuters
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